Understanding Recording Contracts
Once a band or artist signs a record contract they are bound by it. The same as we are when we sign a new mobile phone contract. You know how it is after 1 year of a 24 month contract, we are usually sick of the phone and want a new one! So, if we don’t like the contract, we don’t sign it. In many cases outside of the music industry when someone is about to sign a contract, he or she hires a lawyer to interpret the contract and to help negotiate terms or even just understand the contract before its being signed. Since this blog is about the music industry and musicians, looking at a music contract, with an entertainment lawyer would be best suited they must be familiar with many different agreements and especially recording contracts.
The main reason musicians sign a record contract is for help with global exposure, getting the world and music out there and fame, the biggest reason for signing a recording contract is for them to actually get paid for their music. The record company will record the band, master it, bring in a producer to produce the album and sell them through record stores. (HMV Etc) The band only get paid a percentage of each album sold, not the full how much ever the CD is for sale for. This percentage is known as a royalty. There are other ways for musicians to make money which I posted in a previous post about incomes and expenses, but royalties on the sales of albums is the main source of money coming from a recording contract.
The percentage that the bands receive for each album sold is a negotiating point, but most usually on most contacts it can fall anywhere between 10% and 20% which when you think about it, isnt really that much, but at the end it soon adds up. Most new artists get a royalty percentage at around 10% because they are a new artist. If a CD sells for $15 and the royalty percentage is 10%, the band should get $1.50 for the sale of each CD that is sold. If the band was to sell a lot of copies they would get a great sum back, but with internet piracy, illegal downloading, and leaking of CD’s, artists are not getting what they originally would.
In some cases outside of America or with Indie Labels, the record company and artists split the profits of new CD 50/50. They will calculate the profits , the label takes the receipts for the album and deducts all of the direct costs. Direct costs meaning, studio time, cost of technicians to produce the CD, packaging, mastering, shipping to retailers, marketing, advertising, legal cost, taxes etc. Leaving the artist with the remainder of what is left. You can see that there is no guarantee at all that the band will make any money from a recording contract but in many cases with successful bands, there is not usually a problem. As a small band just starting out, and back when huge bands was starting out, its hard to think that they had no money, but maybe now it is clear why they had no money.
Promoting and marketing is also a big part of a recording contract, big names like Island Records, are one of the record labels, that if you asked anyone to name one, it would probably be one of the top said. Artists need as much promotion as possible, internet, TV, magazine, radio. A label can help with the exposure of that, and get the band out there, so people start talking and most importantly buying the music.
In return for royalties on albums sold the band also agrees to record those albums when signing the contract, (DUH!) Normally the recording contract will specify the contract periods very clearly, giving the band an indication of when the label wants the CD by, and a deadline that the recorded and finished CD will be ready. So when many people tweet at new bands “GIVE US A NEW CD!” and “WHEN WILL THE NEW CD BE OUT?!!”….Usually. They cannot release it yet. As stated on their record contract.
As most of you may remember, Bon Jovi signed a contract stating they would release a greatest hits CD along with a few extra tracks, as requested by the record company. During the time of world issues, Jon and Richie began writing and “The Circle” came into works. The record label, after most likely endless meetings and get together’s agreed to release the CD. The greatest hits also followed, as it was a binding record contract agreement. Not an extra money cash in. But an already signed agreement.
Our favourite band goes into the studio and records a new album the contract will specify that once it is recorded, it is the property of the record label the label owns the songs the band have recorded for a very, very long time. Sometimes with a duration of 5-10 years. This actually stops the band from re-recording any of the songs on the album for five to 10 years after the end of the contract.
Also….If the record label does not like the album, it has the right to reject it meaning the band has to record another album, so there could actually be some amazing albums out there of our favorite artists, which the record label hated, and we never got chance to actually hear, unless songs were released as demos or B-Sides. The label can also accept an album but shelve it and never release it. The lock-out of the 5-10 year duation will still apply in that case, even though the songs were never released!
TheTECHtotheMUSIC 